Water Purchase Agreements (WPA): PUBLIC-PRIVATE PARTNERSHIPS (PPP) AS A STRATEGY TO DEVELOP BULK WATER/IRRIGATION/SEWERAGE PROJECTS

Idealistic Masterplan for Water Security in Kenya

A Water Public-Private Partnership (PPP) involves collaboration between public and private entities to design, finance, implement, and operate water infrastructure projects.

These partnerships aim to leverage the strengths of both public and private sectors to enhance the efficiency, quality, security, and sustainability of water services.

Some of the key components that are major considerations when working on these Water & Sewerage PPP’s include:

  1. Stakeholder Engagement: Involving local communities, government agencies, private sector entities, and other relevant stakeholders in the planning and decision-making processes.
  2. Legal and Regulatory Framework: Establishing clear legal and regulatory frameworks that define the roles, responsibilities, and rights of each party involved in the PPP.
  3. Risk Allocation: Identifying and allocating risks appropriately between the public and private sectors to ensure a fair and balanced distribution of responsibilities.
  4. Financial Structure: Developing a financial model that outlines how the project will be funded, including the contributions from the public and private sectors, user fees, and potential subsidies, grants and viability gap funding.
  5. Performance Standards: Defining specific performance standards and benchmarks to ensure the quality and efficiency of the water service provided by the private sector partner.
  6. Tariff Structure: Establishing a transparent and sustainable tariff structure that considers affordability for users (their willingness to pay) while providing sufficient revenue for the private operator to cover costs and make a reasonable profit.
  7. Contractual Arrangements: Crafting a comprehensive and clear contract that outlines the terms, conditions, and obligations of both the public and private partners.
  8. Technology and Innovation: Incorporating appropriate and innovative technologies to enhance the efficiency and sustainability of water/sewerage infrastructure. Including technology-change risk transfer throughout the life of the partnership.
  9. Monitoring and Evaluation: Implementing a robust system for monitoring and evaluating the performance of the project against predefined indicators and goals.
  10. Environmental and Social Considerations: Addressing environmental and social concerns to ensure that the project is carried out in a sustainable and socially responsible manner.
  11. Capacity Building: Building the capacity of the public sector to effectively manage and oversee the PPP, as well as developing the skills and capabilities of the private sector partner.
  12. Dispute Resolution Mechanism: Establishing a mechanism for resolving disputes between the public and private partners in a timely and fair manner.

Water PPP Strategy: Government Perspective

Water PPPs are a priority. Harvesting, water reuse and recycling are priorities as outlined. Innovative and climate resilient approaches are highlighted as essential.

Snippet of KK Water Plan as Per Manifesto
Snippet

Legal & Regulatory Frameworks

Kenya PPP Laws, 2021 and Regulations, 2023

The PPP Laws, 2021 are in place – see useful article on the PPP Act, 2021 amendments here: https://www.linkedin.com/pulse/kenya-new-public-private-partnerships-ppp-law-2021-conrad/

The PPP Regulations, 2023 have been approved by Cabinet to provide the procedural requirements to be follower by contracting authorities during the initial, planning, procurement and execution of the proposed PPP project.

Snippet of Cabinet approval of PPP Regulations, 2023

Water (Amendment) Bill, 2023

Snippet of the Water (Amendment) Bill, 2023

The Water (Amendment) Bill, 2023 (the Bill) seeks to promote private investment in the water sector through the public-private partnerships (PPPs) model. The amendments seek to achieve this by expanding the remit of national government entities such as the Water Works Development Agencies (WWDAs) and National Water Storage Authority (the NWSA) to allow them to provide water services by allowing them to enter into bulk water purchase agreements under the PPP Act, 2021(the PPP Act) which was previously the preserve of county water service providers (WSPs).

The 9 Water Works Development Agencies

The Bill proposes to amend the Water Act, 2016 (the Act) to allow WWDAs (which are national Government entities) (i) to operate national public water works, and (ii) to provide water services by entering into bulk water purchasing agreements structured as PPPs. The Bill also allows the NWSA to enter into bulk water purchasing agreements.

Water PPP Structure

The Water Public-Private Partnerships (PPP) structure proposed as per Kenya National Treasury Kenya PPP Directorate, National Treasury, Kenya

PPP Proposed Structure

When private investors sell bulk water, the revenues to pay the private investors will ultimately be generated from collections by Water Service Providers (WSPs).  Non-Revenue Water (NRW) reduces the amount of money that WSPs may obtain from the end users. NRW refers to water that has been produced/pumped and then lost or unaccounted for through either physical or commercial losses.  This means that the WSPs and eventually the Water Works Development Agency (WWDAs) may not generate enough revenue to pay for water under the bulk water purchase agreements. The Government (Government Support Measure – GSM) will therefore either have to buck-stop the “user-pay” payment responsibilities incase of shortfall of WWDAs or structure the PPPs to include oversight at the WSP level to limit revenue leakage.

Simplified Overview of Obligations of the Parties to the WPA

Water PPP Strategy: Developer Perspective

Key steps towards towards identifying and developing the water PPP’s is to:

  1. Identify the projects in the pipeline at Water Service Provider Level (Counties), County Government Projects, Water Development Agencies and at Ministry / National Level. See: https://ppp.water.go.ke/
  2. PPP alignment and requirement. Aligned to National / County Development Plans.
  3. PPP Developer / Partner onboarding – Process of selecting, identification and selection of a Water Development Partner. Privately Initiated Proposal are welcomed based on specific criteria.
Water PPP Strategy

Water PPP Assessment & Management Framework – Cheat Sheet

A summarized Water PPP Assessment & Management Framework should cover 3 aspects:

  1. Financials: The bankability of the project.
  2. Legal: The legal and regulatory framework of the Country / County.
  3. Technical: It is technically possible?

The overall Feasibility Study should provide all this information as below.

Water PPP: Management Framework_Cheatsheet
Water PPP: Management Framework_Financials
Water PPP: Management Framework_Technical
Water PPP: Management Framework_Legal

Water PPPs offer a flexible and adaptive approach to addressing water challenges, tailoring solutions to the specific needs of each project and region. Successful partnerships require careful planning, effective governance, and ongoing collaboration to ensure the sustainable delivery of quality water services.

This article is mainly written mainly to attract collaboration and interested stakeholders to share experiences. Will link stakeholders in time.

Fairventures Worldwide gGmbH; Women in Water & Sanitation Association Kenya; Global Water Partnership Southern Africa; Christine Ng’ang’a; Water Supply and Sanitation Collaborative Council – WSSCC; USAID’s Kenya Investment Mechanism; International Water Management Institute (IWMI); Public-Private Infrastructure Advisory Facility (PPIAF); InfraCo Africa; Emerging Africa Infrastructure Fund; GuarantCo; Water Finance Facility (WFF); International Institute for Sustainable Development; Climate Finance KENYA; Continental Africa Water Investment Programme – AIP; Africa Water Infrastructure Development (AWID); KENYA POOLED WATER FUND; The Private Infrastructure Development Group; Blue Finance Group; Almar Water Solutions; Carlos Cosin; Manel Salvadó Tenessa; OECD – OCDE; Metito; Walid Madwar; Africa Water Infrastructure Development (AWID) ; Ernest Poku; Zachariah Mwangi E.G.H; Julius K. Korir; Sinopec Engineering Group Saudi Co. Ltd.; ACCIONA; UNECE Public-Private Partnerships; African Development Bank Group; Osward M Chanda; IFC Public-Private Partnerships Global Water Innovation ; Saudi Water Partnership Company ; WaterEquity; Mónica A. Altamirano de Jong, PhD; Water & Sanitation for the Urban Poor (WSUP) ; Center for Water Informatics & Climate Resilience (CWC) ; Water Sector Trust Fund (WaterFund)